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Public pressure and corporate tax behaviour

Scott Dyreng (), Jeffrey Hoopes () and Jaron Wilde ()
Additional contact information
Scott Dyreng: Fuqua School of Business, Duke University
Jaron Wilde: Tippie College of Business, University of Iowa

No 1416, Working Papers from Oxford University Centre for Business Taxation

Abstract: We examine whether public pressure related to compliance with subsidiary disclosure rules influences corporate tax behaviour. ActionAid International, a non-profit activist group, levied public pressure on non-compliant UK firms in the FTSE 100 to comply with a rule requiring UK firms to disclose the location of all of their subsidiaries. We use this natural experiment to examine whether the public pressure led scrutinized firms to decrease tax avoidance and reduce the use of subsidiaries in tax haven countries relative to other firms in the FTSE 100 not affected by the public pressure. The evidence suggests that the public scrutiny sufficiently changed the costs and benefits of tax avoidance such that tax expense increased for scrutinized firms. The results suggest that public pressure from outside activist groups can exert a significant influence on the behaviour of large publicly-traded firms. Our findings extend prior research that has had little success documenting an empirical relation between public scrutiny of tax avoidance and firm behaviour.

JEL-codes: H25 H26 H20 G39 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-mfd, nep-pbe and nep-pub
Date: 2014
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Journal Article: Public Pressure and Corporate Tax Behavior (2016) Downloads
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